Running head: Beginning the Audit Report
Beginning the Audit Report
August 20, 2012
AUDIT ENGAGEMENT LETTER
August 20, 2012
10253 W. Higgins Rd. Ste 600
Rosemont, IL 60018
Dear Mr. Lancaster:
This letter is to confirm our understanding of the terms and objectives of our engagement and the nature and limitations of the services we will provide.
We will audit the financial statements of Apollo Shoes as of December 31, 2011, and for the year then ending. We will also audit management’s assertion about the effectiveness of internal control over financial reporting at December 31, 2011. Upon completion of our audits, we will provide you with our audits report on the financial statements and internal control. If for any reasons caused by you or relating to the affairs of the Company, we are unable to complete the audits, we may decline to issue a report as a result of this engagement.
In conjunction with the annual audit, we will perform reviews of the Company’s unaudited quarterly financial statements and related data for each of the first three quarter in the year ending December 31, 2011. These reviews will be conducted in accordance with standards established by the Public Company Accounting Oversight Board (United States), and are substantially less in scope than audits. Accordingly, a review may not reveal material modifications to the quarterly financial information to make it confirm with generally accepted accounting principles.
Our Responsibilities and limitations
The objective of our audit is the expression of an opinion about whether your consolidated financial statements are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America. Our audit will be conducted in accordance with auditing standards generally accepted in the United States and will include tests of your accounting records and other procedures we consider necessary to enable us to express such an opinion. If our opinion is other than unqualified, we will discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed an opinion, we may decline to express an opinion or to issue a report as a result of this engagement. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, tests of the physical existence of inventories, and direct confirmation of receivables and payables and certain other assets and liabilities by correspondence with selected customers, creditors, and financial institutions. We will also request written representations from your attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our audit, we will require certain written representations from you about the financial statements and related matters.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Consequently, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. Also, we will plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Because an audit is designed to provide reasonable, but not absolute, assurance and because we will not perform a detailed examination of all transactions, there is a risk that material errors, fraud, or illegal acts, may exist and not be detected by us. In addition, an audit is not designed to detect immaterial errors, fraud, or other illegal acts or illegal acts that do not have a direct effect on the financial statements. Our engagement cannot, therefore, be relied upon to disclose errors, fraud, or other illegal acts that may exist. However, we will inform you...
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